Airway epithelial cells secrete proinflammatory mediators in response to LPS, but cytokine production by a prominent nonciliated bronchiolar epithelial cell, the Clara cell, specifically, is unknown. To investigate Clara cell cytokine production in response to LPS, we used a transformed murine Clara cell line, C22, and isolated Clara cells from C57Bl/6 mice. Stimulation of both cell types with LPS resulted in significant upregulation of keratinocyte-derived chemokine (KC) and monocyte chemoattractant protein-1, but did not induce TNF-α production. To determine whether LPS induces cytokine production by Clara cells in vivo, LPS was instilled intratracheally into mice. KC was expressed by Clara cells, alveolar type 2 cells, and alveolar macrophages, 2 h after LPS administration, as determined by in situ hybridization. TNF-α, although not expressed in airway epithelial cells, was expressed primarily in alveolar macrophages in response to LPS. To assess the impact of Clara cells on KC and TNF-α production in the lung in the early response to LPS, mice were treated with naphthalene to selectively induce Clara cell injury before LPS stimulation. KC expression in the airways and the lung periphery, and KC and TNF-α levels in the bronchoalveolar lavage fluid, were significantly reduced in naphthalene-treated vs. vehicle-treated mice after LPS stimulation. Furthermore, transwell cocultures of C22 cells and RAW264.7 macrophages indicated that C22 cells released a soluble factor(s) in response to LPS that enhanced macrophage production of TNF-α. These results indicate that Clara cells elaborate cytokines and modulate the lung innate immune response to LPS.